This is the accessible text file for GAO report number GAO-13-262R
entitled 'Alternative Methods for Collecting Airport Passenger
Facility Charges' which was released on February 14, 2013.
This text file was formatted by the U.S. Government Accountability
Office (GAO) to be accessible to users with visual impairments, as
part of a longer term project to improve GAO products' accessibility.
Every attempt has been made to maintain the structural and data
integrity of the original printed product. Accessibility features,
such as text descriptions of tables, consecutively numbered footnotes
placed at the end of the file, and the text of agency comment letters,
are provided but may not exactly duplicate the presentation or format
of the printed version. The portable document format (PDF) file is an
exact electronic replica of the printed version. We welcome your
feedback. Please E-mail your comments regarding the contents or
accessibility features of this document to Webmaster@gao.gov.
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed
in its entirety without further permission from GAO. Because this work
may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this
material separately.
GAO-13-262R:
United States Government Accountability Office:
Washington, DC 20548:
February 14, 2013:
The Honorable John D. Rockefeller:
Chairman:
The Honorable John Thune:
Ranking Member:
Committee on Commerce, Science, and Transportation:
United States Senate:
The Honorable Bill Shuster:
Chairman:
The Honorable Nick J. Rahall, II:
Ranking Member:
Committee on Transportation and Infrastructure:
United States House of Representatives:
Subject: Alternative Methods for Collecting Airport Passenger Facility
Charges:
This report formally transmits the briefing held with your offices on
January 15th and 16th, 2013, in response to the mandate under Section
112 of the FAA Modernization and Reform Act of 2012 (FAA
reauthorization act).[Footnote 1] This section directed the
Comptroller General to conduct a study of alternative means of
collecting airport passenger facility charges (PFCs)[Footnote 2] that
would allow such charges to be excluded from the ticket price, and in
conducting this study, to consider: (1) collection options for
arriving, connecting, and departing passengers at airports; (2) cost
sharing or allocation methods based on passenger travel to address
connecting traffic; and (3) examples of airport charges collected by
domestic and international airports that are not included in ticket
prices.[Footnote 3] In fulfilling this mandate, our objective was to
identify existing and potential methods for collecting and allocating
airport passenger facility charges, including from connecting
passengers. Your office concurred that this report meets Section 112's
requirement for the Comptroller General to submit a report not later
than 1 year after the date of enactment of this Act.[Footnote 4]
To conduct this study, we analyzed 2012 data from the International
Air Transport Association's (IATA) online inventory of airport charges
to identify alternative collection methods that are currently being
used at airports worldwide. We determined that the IATA data were
sufficiently reliable for the purposes of our analysis by reviewing
documentation on the inventory and interviewing a knowledgeable IATA
official. We also conducted a literature review of passenger user fees
in the airport industry and other transportation modes to identify
existing or potential alternative collection methods. We interviewed
35 aviation stakeholders with a role in PFC collection and oversight,
including the Department of Transportation (DOT) and the Federal
Aviation Administration (FAA), technology consultants and developers,
travel agents, consumer groups, global distribution systems for
airline ticket processing, as well as representatives from selected
U.S. airlines and airports[Footnote 5] and their respective
associations to identify alternative collection methods, including
methods for addressing connecting traffic, and to obtain views on
potential impacts of alternative methods relative to the current
method. We reviewed literature and GAO reports on fee collection to
identify factors to consider when evaluating alternative passenger fee
collection methods. Lastly, we reviewed applicable laws and
regulations, FAA documents, GAO reports, and industry publications to
identify potential impacts of different fee collection design
elements. We conducted this performance audit from August 2012 through
February 2013 in accordance with generally accepted government-
auditing standards. Those standards require that we plan and perform
the audit to obtain sufficient, appropriate evidence to provide a
reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a
reasonable basis for our findings and conclusions based on our audit
objectives.
In summary, we identified three basic alternative methods to the
current airline ticket-based method for PFC collections. These methods
are not mutually exclusive and could be used by either individual
airports or a group or airports (slides 10 through 13):
1. Kiosk or counter: passengers would pay the PFC at the airport using
a self-service kiosk or payment counter.
2. Internet or online payment: passengers would pay the PFC online
through an airport or third-party Web site during or after the airline
ticket purchase.
3. Emerging technologies: passengers would pay the PFC using their
smartphone, pre-paid card, near field communication (NFC)-enabled
device, or other technology.
We evaluated these alternative methods relative to the current ticket-
based collection method using factors that we identified as key
considerations for evaluating alternative passenger fee collection
methods--passenger experience, customer transparency, administrative
costs, technology readiness, and legal issues (slides 14 through 20).
Based on our evaluation of the alternatives, each faces considerable
challenges to implement, and none of the three alternative methods
that we identified are currently better than the existing collection
method (slide 20). Compared to the current on-ticket PFC collection
method, all alternatives would diminish the passenger experience by
adding another step in the payment or check-in process (slide 15);
reduce customer transparency (slide 16); and entail higher
administrative costs (slide 17). Based on our evaluation of the
alternatives, each faces considerable challenges to implement, and
none of the three alternative methods that we identified are currently
better than the existing collection method (slide 20). At this time,
all of the aviation stakeholders that we spoke to, including
representatives from selected U.S. airports and airlines, support the
current collection method over any alternative due, in part, to
passenger ease and low administrative costs. In the future, however,
it is possible that some of these challenges will be reduced as
technology advances or that airports might be willing to accept the
additional costs and impose additional passenger burdens in return for
an increase in their capital funding.
We provided DOT with a draft of this report for its review and
comment. DOT provided technical comments that we incorporated as
appropriate. In addition, in comments e-mailed to us, DOT officials
generally agreed with our findings. In particular, officials agreed
with our finding that alternatives to the current method for
collecting PFCs would be counter to DOT's recent efforts to provide
consumers with transparency about the full price of air
transportation, particularly because PFC rates vary by airport.
Officials also agreed that alternative collection methods would reduce
efficiency by adding steps in a passenger's air travel experience and
complicate itineraries. DOT officials stated that these challenges, as
well as the legal impacts should be considered when evaluating
alternative collection methods in the future.
We are sending copies of this report to the appropriate congressional
committees and to the Secretary of Transportation. This report will
also be available at no charge on the GAO Web site at [hyperlink,
http://www.gao.gov]. Should you or your staff have questions
concerning this report, please contact me at (202) 512-2834 or
dillinghamg@gao.gov. Contact points for our Offices of Congressional
Relations and Public Affairs may be found on the last page of this
report. Key contributors to this report were Paul Aussendorf,
Assistant Director; Amy Abramowitz, Bert Japikse, Leia Dickerson,
Delwen Jones, Sara Ann Moessbauer, Josh Ormond, Madhav Panwar,
Gretchen Snoey, and Melissa Swearingen.
Signed by:
Gerald L. Dillingham, Ph.D.
Director:
Physical Infrastructure Issues:
Enclosure:
Alternative Methods for Collecting Airport Passenger Facility Charges:
Mandated by Section 112, FAA Modernization and Reform Act of 2012:
(Pub. L. No. 112-95):
Briefings to:
Senate Committee on Commerce, Science, and Transportation and House
Committee on Transportation and Infrastructure:
January 15th and 16th, 2013:
Mandate:
Section 112, FAA Modernization and Reform Act of 2012 directed the
Comptroller General of the United States to conduct a study of
alternative means of collecting passenger facility charges that
would allow such charges to be excluded from the ticket price; to
report on this study within 1 year of the date of enactment of this
Act; and in conducting this study, to consider:
(1) collection options for arriving, connecting, and departing
passengers at airports;
(2) cost sharing or allocation methods based on passenger travel to
address connecting traffic; and;
(3) examples of airport charges collected by domestic and
international airports that are not included in ticket prices.
Scope and Methodology:
* Analyzed 2012 data from International Air Transport Association’s
worldwide online inventory of airport charges and conducted a
literature review to identify alternative collection methods that are
currently being used at airports worldwide and potential alternative
collection methods used by other transportation modes.
* Interviewed aviation stakeholders, including OST/FAA, technology
consultants and developers, travel agents, consumer groups, as well as
representatives from selected U.S. airlines and airports and their
respective associations to identify alternatives, including methods
for addressing connecting traffic, and to obtain views on potential
impacts of alternative methods relative to the current system.
* Reviewed literature and GAO reports on fee collection to identify
factors to consider when evaluating alternative collection methods.
* Reviewed relevant statutes and regulations, FAA documents, GAO
reports, and industry publications to identify potential impacts of
different fee collection design elements.
Passenger Facility Charge (PFC) Program Background:
* PFCs, which are collected from passengers, were introduced in 1990
with a cap of $3 per PFC to finance local airport infrastructure
projects at commercial service airports. Collection of fees began in
1992.
* The goals of the PFC program are to finance projects that:
- contribute to the preservation or enhancement of the national air
transportation system’s safety, security, or capacity;
- reduce noise generated by airport activities; and;
- enhance competition among the airlines.
* Anti-Head Tax Act[Footnote 6] prohibits states, local governments,
and others
from levying or collecting any tax, fee, head charge, or other charge,
directly or indirectly, on individuals traveling in air commerce or on
the transportation of an individual traveling in air commerce, but
specifically exempts the PFC program from this prohibition.
PFC Rate Cap:
* In 2000, Congress raised the cap on PFCs from $3.00 to $4.50 per
boarding passenger.[Footnote 7]
* Senate bill S.223, § 202, 112th Cong., proposed a pilot program at
up to six airports to impose an unlimited PFC collected directly from
passengers by the airport. The proposal was not included in the final
FAA reauthorization.
* Airports have long sought to increase the PFC cap, arguing that the
fee cap has not been adjusted for inflation and that airport funding
available through federal grants is declining.
* Airlines oppose any PFC rate increase, arguing that it inhibits
demand for air travel.
The Current PFC Collection Method:
* PFCs are collected as part of the current ticket payment and
distribution process, which involves many parties.
* Airlines remit PFCs to airports minus an 11˘ administrative
charge per PFC collected.
* According to estimates from aviation industry groups, in recent
years, airlines collected between $69 and $78 million in PFC
administrative charges annually.
* A passenger may be charged no more than two PFCs on a one-
way trip or four PFCs on a round trip (with a maximum charge of
$18).
Figure: Almost all Airports that Collect PFCs Impose the Maximum Rate:
[Refer to PDF for image: horizontal bar graph]
Airport size: Large (1% or more);
Airports that impose a PFC of $4.50[A]: 27;
Airports that impose a PFC of $3.00 or less: 2.
Airport size: Medium (at least 0.25% and less than 1%);
Airports that impose a PFC of $4.50[A]: 30;
Airports that impose a PFC of $3.00 or less: 4.
Airport size: Small (at least 0.05% and less than 0.25%);
Airports that impose a PFC of $4.50[A]: 69;
Airports that impose a PFC of $3.00 or less: 2.
Airport size: Non-hub/Non-primary commercial service (at least 2,500
but less than 0.05%);
Airports that impose a PFC of $4.50[A]: 215;
Airports that impose a PFC of $3.00 or less: 14.
Source: GAO analysis of FAA data.
[A] We have combined the one small hub airport that charges a $4.00
PFC to the $4.50 bar. Data are as of September 2012.
[End of figure]
Most Collection Revenue Is Used to Enhance Capacity or Reduce
Congestion:
Figure: Approved Collection Revenue (in billions) for PFC Projects by
Category, beginning 2006 through 2054:
[Refer to PDF for image: pie-chart]
Capacity or congestion: 74% ($35.6 billion);
Competition: 9% ($4.5 billion);
Security: 7% ($3.3 billion);
Safety: 7% ($3.2 billion);
Noise: 3% ($1.3 billion).
Source: GAO analysis of FAA data.
Note: Data are as of September 2012.
[End of figure]
Vast Majority of PFCs Are Collected By Large Hub Airports:
Figure: PFC Funds Collected by Hub Size, 2012[A]:
[Refer to PDF for image: horizontal bar graph]
Airport size: Large;
Funds collected: $1.49 billion.
Airport size: Medium;
Funds collected: $0.34 billion.
Airport size: Small;
Funds collected: $0.16 billion.
Airport size: Non-hub/Non-primary commercial service;
Funds collected: $0.06 billion.
Source: GAO analysis of FAA data.
[A] Total PFC funds collected from January through September 2012.
[End of figure]
Three Basic Alternatives to Current Ticket-Based Method for PFC
Collections:
1. Kiosk or Counter.
2. Internet or Online Payment.
3. Emerging Technologies.
Note: These alternatives are not mutually exclusive and could be used
for individual airports or a group of airports.
Kiosk or Counter:
* Passengers would pay the PFC at the airport using a self-service
kiosk or payment counter.
* We identified very few airports around the world that currently
collect airport facility charges or airport taxes from the passenger
at the airport.
- Examples identified: Blackpool Airport in the United Kingdom and
Cartagena Airport in Colombia.
* Airports would collect their PFC from originating and connecting
passengers.
* Connecting passengers would pay at kiosks or counters located inside
secure areas, or an airport could choose to exempt connecting
passengers from its PFC.
Internet or Online Payment:
* Passengers would pay the PFC online through an airport or third-
party Web site during or after ticket purchase.
* We did not identify any airports that use this method for collecting
airport passenger fees.
- Examples identified in other applications: PayPal.
* If a third-party Web site is used, participating airports would share
costs for collecting the fees and a clearinghouse would need to be
formed to allocate the collections among airports.
* Connecting passengers with multiple airports in an itinerary would
either need to visit multiple airport Web sites or a third-party Web
site would have to include all airport PFCs for that itinerary.
Emerging Technologies:
* Passengers would pay the PFC using their smartphone,
pre-paid card, near field communication (NFC)-enabled device, or other
technology.
* We did not identify any airports that use this method for collecting
airport passenger fees.
- Examples identified in other applications: EZ-Pass and SmarTrip.
* An airport could individually develop technology infrastructure to
support collection at its airport. Alternatively, a third party could
be used by airports to share costs for collecting the PFCs and
allocating the collections among airports.
* Connecting passengers with multiple airports in their itinerary would
either need to pay individually for each airport or a third-party would
collect all airport PFCs imposed for that itinerary.
Key Considerations for Evaluating Alternative PFC Collection Methods:
* Passenger Experience.
* Customer Transparency.
* Administrative Costs.
* Technology Readiness.
* Legal Impacts.
Passenger Experience:
All alternatives would diminish passenger experience.
* Kiosk or Counter: Introduces extra check-in step, which could
increase airport check-in times and transfer times for connecting
flights. Could lead to more missed connections.
* Internet or Online Payment: Introduces extra step during ticket
purchase, which could create passenger confusion and irritation from
entering credit card information twice. Research suggests passenger
could abandon ticket purchase altogether.
* Emerging Technologies: Introduces an extra step to travel and
presumes that a majority of travelers have the technology.
Customer Transparency:
* All collection alternatives would decrease transparency because a
passenger may not be aware of the PFC until after already purchasing
ticket, particularly if alternative collection method is not
universally implemented.
* Department of Transportation’s full-price advertising rule[Footnote
8] supports transparency of all mandatory charges associated with air
transportation.
* Conversely, a passenger who pays the PFC directly to the airport may
better understand that PFCs are used for airport infrastructure
projects.
Administrative Costs:
* All collection alternatives would require development of new
infrastructure.
* For example, kiosks, payment systems, software platform,
or clearinghouse.
* All alternatives would likely entail administrative costs greater
than 11˘ per PFC that airports currently pay.
* For example, would require separate increased costs for collection
and enforcement staff, payment validation systems, credit card
processing fees, or revenue accounting systems.
Technology Readiness:
All alternatives would present some technological challenges or raise
security concerns.
* Kiosk or Counter: Tested at smaller airports. May not be scalable to
large airports due to space constraints and large volume of
passengers.
* Online Payment and Emerging Technologies: Unclear how charges
could be verified (proof of purchase) or how to make refunds.
Security concerns would arise with sharing passenger data and
credit card information. Would require a backup payment method
for passengers who do not have or opt not to use these
technologies for ticket purchase. Current estimates are that 70
percent of airline passengers travel with smartphones[Footnote 9] and
that percentage is expected to grow.
Legal Impacts:
* Regulations stipulate that only airlines can collect PFCs.[Footnote
10]
* The Anti-Head Tax Act was enacted in response to significant
public objection to state and local head taxes on air
commerce.[Footnote 11]
* Full-price advertising rule requires airlines to include PFCs
and all other taxes and mandatory fees in disclosing the full
listed price for air transportation.[Footnote 12]
* Airports may need access to personal information such as
passenger itineraries, which airlines are not required to share.
Table: No Alternatives Identified Are Currently Better Than Existing
Collection Method:
Key considerations: Passenger Experience;
Alternatives (relative to the current collection method):
Kiosk or Counter: Negative;
Internet or Online Payment: Negative;
Emerging Technologies: Negative.
Key considerations: Transparency;
Alternatives (relative to the current collection method):
Kiosk or Counter: Negative;
Internet or Online Payment: Negative;
Emerging Technologies: Negative.
Key considerations: Costs;
Alternatives (relative to the current collection method):
Kiosk or Counter: Negative;
Internet or Online Payment: Negative;
Emerging Technologies: Negative.
Key considerations: Technology Readiness;
Alternatives (relative to the current collection method):
Kiosk or Counter: Neutral;
Internet or Online Payment: Negative;
Emerging Technologies: Negative.
Key considerations: Legal Impacts;
Alternatives (relative to the current collection method):
Would require modifications to current law.
Source: GAO.
[End of table]
Aviation Stakeholders Support Current Collection Method:
* All airport authorities (9) and airlines (4) that we spoke with
support current method.
- Airports primarily support increasing the PFC cap with the current
collection method, but might consider using an alternative method if
the PFC cap was lifted.
- Airlines do not support increasing the PFC regardless of the
collection method used.
* Other stakeholders that we spoke with also support current method.
- Consumer groups.
- Travel agents.
- Technology stakeholders.
- FAA and DOT.
* Alternative collection methods are not a priority for the Airports
Council International–North America or U.S. Travel Association (USTA),
among others.
[End of enclosure]
Footnotes:
[1] Pub. L. No. 112-95, § 112, 126 Stat. 11, 18 (2012).
[2] PFCs, which are collected from passengers, were introduced in 1990
with a cap of $3 per PFC to finance local airport infrastructure
projects at commercial service airports. Collection of fees began in
1992. In 2000, Congress raised the cap on PFCs from $3.00 to $4.50 per
boarding passenger. Wendell H. Ford Aviation Investment and Reform Act
for the 21st Century (AIR-21), Pub. L. No. 106-181, § 105, 114 Stat.
61, 71 (2000).
[3] During negotiations for the FAA reauthorization act, Senate bill
S.223, § 202, 112th Cong., proposed a pilot program at up to six
airports to impose an unlimited PFC collected directly from passengers
by the participating airports. While this pilot program was not
included in the final act, potential alternative collection methods
have been explored by airport interests with the intention that an
airport could impose an unlimited facility charge if the airport
collected it directly from the passenger.
[4] The FAA reauthorization act was enacted on February 14, 2012. One
year after that date is February 14, 2013.
[5] We selected nine airports with a variety of airport size, airport
traffic, and imposed PFC rate and four airlines with a variety of
business models and levels of passenger traffic.
[6] 49 U.S.C. 40116.
[7] Wendell H. Ford Aviation Investment and Reform Act for the 21st
Century (AIR-21), Pub. L. No. 106181, § 105, 114 Stat. 61, 71 (2000).
[8] 14 C.F.R. §399.84.
[9] Air Transport World and SITA, 2012 Passenger Self-Service Survey,
2012.
[10] 14 C.F.R. §158.45.
[11] 1973 U.S.C.C.A.A.N. 1434, 1446.
[12] 14 C.F.R. §399.84.
[End of section]
GAO’s Mission:
The Government Accountability Office, the audit, evaluation, and
investigative arm of Congress, exists to support Congress in meeting
its constitutional responsibilities and to help improve the
performance and accountability of the federal government for the
American people. GAO examines the use of public funds; evaluates
federal programs and policies; and provides analyses, recommendations,
and other assistance to help Congress make informed oversight, policy,
and funding decisions. GAO’s commitment to good government is
reflected in its core values of accountability, integrity, and
reliability.
Obtaining Copies of GAO Reports and Testimony:
The fastest and easiest way to obtain copies of GAO documents at no
cost is through GAO’s website [hyperlink, http://www.gao.gov]. Each
weekday afternoon, GAO posts on its website newly released reports,
testimony, and correspondence. To have GAO e-mail you a list of newly
posted products, go to [hyperlink, http://www.gao.gov] and select
“E-mail Updates.”
Order by Phone:
The price of each GAO publication reflects GAO’s actual cost of
production and distribution and depends on the number of pages in the
publication and whether the publication is printed in color or black
and white. Pricing and ordering information is posted on GAO’s
website, [hyperlink, http://www.gao.gov/ordering.htm].
Place orders by calling (202) 512-6000, toll free (866) 801-7077, or
TDD (202) 512-2537.
Orders may be paid for using American Express, Discover Card,
MasterCard, Visa, check, or money order. Call for additional
information.
Connect with GAO:
Connect with GAO on facebook, flickr, twitter, and YouTube.
Subscribe to our RSS Feeds or E mail Updates. Listen to our Podcasts.
Visit GAO on the web at [hyperlink, http://www.gao.gov].
To Report Fraud, Waste, and Abuse in Federal Programs:
Contact:
Website: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm];
E-mail: fraudnet@gao.gov;
Automated answering system: (800) 424-5454 or (202) 512-7470.
Congressional Relations:
Katherine Siggerud, Managing Director, siggerudk@gao.gov:
(202) 512-4400:
U.S. Government Accountability Office:
441 G Street NW, Room 7125:
Washington, DC 20548.
Public Affairs:
Chuck Young, Managing Director, youngc1@gao.gov:
(202) 512-4800:
U.S. Government Accountability Office:
441 G Street NW, Room 7149:
Washington, DC 20548.
[End of document]